Nalcor takes great pride in promoting its econometrics based model that was ostensibly designed to predict the island’s energy demand over the next 20 years. If you aren’t familiar with such modeling applications, you should not be intimidated by them. This is merely a computer program which provides for a range of variables to predict a future trend in energy consumption.
But, as with all computer programs, remember the axiom “garbage in/garbage out.” Nalcor, long ago, should have had a harder look at the numbers this model generated, especially in light of the fact that they have consistently, since 1970, over-estimated, and by a huge margin, the amount of electrical power consumed here.
A bit of history is necessary: from 1970-1990, electrical requirements on the island of Newfoundland increased 4.4 per cent. This was the result of an increasing population and the fact that household appliances, particularly electric stoves, refrigerators, automatic washers and dryers and electric heat, etc., became more prevalent. Essentially, more households could afford these appliances during that period because disposable incomes had increased. As well, industrial activity was more prevalent. Interestingly, from 1990-2010, the increase in electrical requirements rose by a mere 0.1 per cent, a result likely brought about by the near-saturation for household appliance usage and, just as importantly, a declining population. For the period from 2004-2010, electrical demand turned a negative 2.5 per cent.
Notwithstanding the historical data, which demonstrates a lengthy period of declining energy use, Nalcor is predicting energy usage for residential, commercial and industrial customers to grow at an average rate of 1.3 per cent up to the year 2029. This rate of growth was arrived at even though statistics show that our population will decrease again by 2014, and after acknowledging that the penetration point has likely been reached for appliance usage per household. The realities are that households are now buying more energyefficient products; rural Newfoundland is losing population ( for several reasons, largely due to structural changes in the fishery) and outport homes are being abandoned. Add to this — dare I be accused of its downfall, that the future of the Corner Brook paper mill is uncertain.
The price for electricity on the island is forecast to climb above 50 per cent in the period to 2017. This, according to Nalcor, will be followed by a three per cent decline in household energy use. The increase in power costs will make it unaffordable for some, who may well revert to less costly methods of heating their homes. The government’s own analysis has indicated that by 2025 a full 33 per cent of the population of the province will be above 65 years old. For those on fixed incomes or government pensions, a 50 per cent increase in an electrical bill will be very difficult to manage, as it will be for everyone else, especially if interest rates also rise during this period, as predicted.
In addition, the Public Utilities Board (PUB) acknowledged in its review that Nalcor’s total demand for electricity forecast, conducted in 2010, is now two years old and that the company has failed to update its forecast. I would make the same comment that the PUB made: a 2012 forecast would demonstrate the 2010 numbers are still relevant. In addition, the PUB pointed out that “there would be no energy deficit during the 20-year planning period (to 2029).” If there is no risk of energy deficit to 2029, could someone please advise the public what the rush is to engage in this terribly risk-laden project?
One reminder is essential. Even if we don’t need the power, Nalcor and the government have us contracted to use 40 per cent of the generation capacity from Muskrat Falls anyway. And they have us geared to pay for 100 per cent of it, including the power that is being given free of charge (20 per cent), to Emera of Nova Scotia. The Nova Scotia consumer will receive Muskrat Falls power for less than what we will be paying for it on the island of Newfoundland.
The price that Nalcor will receive from exporting (assuming it can) the remaining 40 per cent will be far less than what it costs to produce. This fact has been confirmed by a number of energy consultants. It makes one wonder how much subsidy is going to be given to Vale Inco and how much subsidy the Newfoundland rate payer will be asked to subsidize other industrial customers that may come our way.
I think that Nalcor has inflated the electrical needs of the island, put our cost of living at considerable risk and is determined to extend the province’s borrowing capacity beyond what is safe and sustainable. We have enjoyed reasonable rates for electricity in the past. We are now, for household use, on average the fourth-lowest cost electricity user in Canada. This consumer would like to have Nalcor keep it that way.
Perhaps the best closing for this article is provided by the PUB. On page 41 of its review it stated, “... there is not an immediate need for the large incremental supply associated with the interconnected option (Muskrat Falls) and that island electricity needs could be met in the short and medium term with available renewable resources on the island and/or additional thermal generation.”
Is anyone listening?
– Brendan Sullivan